Brazil legislation offering opportunity to foreign investors to take advantage of their local businesses

Partner of Sampaio Ferraz Advogados (Lawyers), Dr Luís Wielewicki, said Brazil does not intend to address short-term investments in bonds or other securities issued in their country, including the high-interest bonds issued by the Brazilian Federal Government. Mr Wielewicki was speaking about foreign investment in Brazil, a blend of corporate, capital markets and contractual possibilities at the Brazil-
South Africa Trade and Investments seminar in March. He said that Brazil’s focus was on direct foreign investments in local business.

Dr Wielewicki said Brazilian legislation offers a multitude of options for foreign long-term investors to take advantage of local business opportunities. He added that discussions about the form of investment takes effort and the most efficient structure for each investment requires disclosure and understanding of, at least, the most important tactical and strategic objectives of an investment.

Dr Wielewicki said another important factor is shareholders’ structures, and that picking a local partner requires a clear negotiation of economic and political rights of the parties in the intended business structure. He added that if an investor is used to a typical common-law corporate and capital market structure, investors will find comfort in dealing with the Brazilian legal structures.

Foreign investment rules in Brazil

José Carlos Junqueira Sampaio Meirelles of Pinheiro Neto Advogados, spoke about foreign investment rules in Brazil. He said Brazil is a dynamic country that stands out for its multifarious values, characteristics and opportunities. ‘The public sector and the private initiative intertwine in a unique business environment, which makes the country a challenge for organisations from other cultures,’ Mr Sampaio Meirelles said.

Mr Sampaio Meirelles pointed out that Brazil is generally considered a friendly environment for foreign investments, in addition to the aforementioned blending of public and private initiatives, there are other elements that may further complicate matters for foreign investors sailing into Brazil’s complex business environment, such as a very intricate and sometimes confusing or even contradictory tax and regulatory requirements, instability arising from constant enactment of new laws and corruption scandals soaring in the country.

Mr Sampaio Meirelles added that when planning to direct resources to Brazil, foreign investors should be aware of how business is run and regulated in the country. He said for instance, the fact that in Brazil, the incorporation and operation of companies are governed by federal laws, which are applicable throughout the country. ‘Consequently, from a strictly legal point of view, there is, in principle, no advantage to be gained from choosing a particular region or state,’ Mr Sampaio Meirelles added.

Mr Sampaio Meirelles also noted that another matter an investor must have is the knowledge about which type of entity they should invest in. He added that corporations/joint stock companies and limited liability companies (which are the most common forms of business organisations in Brazil) have different regulations, implying certain advantages depending on the intended structure of investment.

Mr Sampaio Meirelles spoke about restrictions for foreigners in Brazil. He said there was no restriction –

on participation by foreigners in either limited companies;

limits to the proportion of capital, which may be held by foreigners; or

the need to obtain authorisation from any government department before a Brazilian company may be formed by foreign individuals or companies.

Mr Sampaio Meirelles said the only restrictions, which related to the investment companies, were namely, the percentage of equity interest allowed for a foreigner to hold and need for previous government authorisation, relating to companies that act in certain specific industries, such as health services, the fishing industry and the civil aviation sector.